Markets technical overview and trading signals for the week 26-30 November 2012


Good Morning. Very nice up swing in the major indexes. We ended last week on important levels of support, waiting for a bounce or a breakdown. We bounced.

Here’s the new charts of MMTW and MMTI mentioned in the last update:

I want to start this weekly update with a look at seasonalities since December is notoriously a good month for the markets. We may find ourselves at the end of a correction, ready to spring higher, OR this may be the beginning of a downtrend, as mentioned in previous posts. Seasonalities though are quite to the bulls’ side.

S&P 500 seasonailities DAX seasonailities   CAC40 seasonailities   FTSE seasonailities Here’s what the algo is saying for next week. I’ll quote parts of last week’s report to analyze the points that turned out to be incorrect.

Amsterdam AEX

Previous report: The algo never gave a reversal signal. For those who hold the short  from 337, good job. For those waiting for a bounce play: be careful. On Friday’s close the algo gave an alert signal. The grey triangle is the weakest alert, should a blu triangle appear the chances for a quick bounce play will increase. We are now out of the trading range and it looks like we are starting a down trend. With this configuration of moving averages and price action the signals to pay attention to are the yellow and red triangles. Our gameplan here: no longs: even if we bounce, the reward doesn’t match the risk. We hope for a bounce to 326-330 to start a new long term short.

We had a buy signal at the end of Monday that turned out to be very good. We sticked to the plan and missed the trade. The yellow signal (short alert) triggered at the end of the week. I’m waiting for a confirmation / red triangle to short with a 320 target. France CAC

Previous report: No clear signals on the CAC40. Price is sitting on the spport around 3350, out of the lower bollinger and in oversold territory, but still looking weak. Should the support fail to hold a possible trade is to try to play the breakdown. I’ll not play the CAC unless a clear signal shows up.

Same as above. A juicy long was missed. The system never triggered a buy because of internal conflicting signals. It is short at 3528 on Friday’s close.  Target is 3400. I would put a stop at 3600 giving us a 72:128 points or risk reward. Generally, red triangles on the upper bollinger band are fairly strong sell signals.

GERMAN DAX

Previous report If we continue to slide and gain momentum we could go to 6800 quickly. Gameplan here: wait to see if we can have a short entry point at the 7100 resistance or play it intraday.

Strong bounce on the DAX that brought us back at 7300. The short alert triggered at 7200 but the system is still waiting for a confirmation to go short. Quite frankly, the bounce was impressive with 5 green candle and not much hesitation. Volume, however, is relatively low. I’m not putting a lot of confidence on this move. The internals of the algo are very clear. A short confirmation signal will almost surely appear if we start weak tomorrow. I’d like to see a short signal close to the bollinger to short with confidence. Stop will be close.

ITALY MIB

No clear long signals registered this week. The algo’s internals are relatively clear now, as opposed to the conflicting signals received around the 15000 level.  It is in overbought territory and ready to enter short. I think it’s likely we see a touch of the daily upper Bollinger band. Should the red triangle appear around 16000, we will start a swing short with target 15000. Despite the 5 green candles the chart remains quite weak as the volume chart below shows.

SPAIN IBEX 35

Last report: Surprisingly strong the Spanish index gave us a long play on Monday. Price reached the declining 25 and 50 moving averages that are acting as  strong resistance. The internals of the algo started to reverse but no closing signal appeared because thresholds have not been reached. Longs still open should be closed here in my opinion, the reversal in the algo’s internals is quite strong.

That was a mistake. Price action brought us back at 7900. The algo never close the long. In all honesty I would have closed the long early in the week, losing half of the swing. Algo is still long now, but in overbought territory.

SP 500

Is it real? S&P bounced hard and reached 1400 with no red candles during this short trading week.  The system was in alert the 20th November but it was negated by the long candle on Friday. The trendline has been broken which may be indicative of strenght coming in. December is notoriously a good month for the market and I think odds are for the bulls. However, the system is flagging overbought here and I’m not sure that the momentum play will continue to push us higher without a pause. I want to see another 3 or 4 trading days before saying that the wall of worry is back. My plan is to wait for a red triangle and try a quick short. I give it 50% of chance. Here’s Peter Reznicek’s analysis. He’s one of the best out there. You can find him at ShadowTrader.

 

DJIA

Not to much to add to the picture for what concerns the DJIA and Nasdaq. Trendlines have been violated and Friday’s close is firmly above them. There are levels of resistance where  I expect some profit taking. I’ll try to gauge the momenum of the move from the action around these resistance levels. The system however will probably give a short signal soon since the internals are a bit stretched.

NASDAQ

That’s all for the week, dont’ forget to follow updates directly on our twitter stream or by liking us on Fb here. Make it a great week.

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